FM Phase III: Radio players upbeat; see 30 pc y-o-y growth

Union Information and Broadcasting Minister Ambika Soni said on July 7, 2011, that the Cabinet had approved Phase III of FM expansion in the country, which would enable the addition of 839 new radio channels across 227 towns.

The Cabinet at its meeting on July 7 also approved increasing the foreign direct investment (FDI) limit in FM radio channels to 26 per cent from the current 20 per cent. An estimated Rs1,733 crore is expected to be raised in this phase, as per Soni.

Calling it a very positive development for the industry, Vineet Singh Hukmani, Managing Director, Radio One, said, “however, the terms of extension are not yet clarified, though we are hoping 15 years for Phase 2 players is applicable as well. When it comes to 800-plus number of stations, it makes radio the largest in terms of reach. Radio players should now join hands and increase the ad rates significantly.”

Sounding equally positive, Apurva Purohit, Chief Executive Officer, Radio City, said, “The fact that the policy has come out and most of the points that we wanted have been covered is very satisfying, this will help in increasing the listenership because of the 800-plus channels. Since it is also the tenth anniversary of Radio City, this is the best birthday gift we could have got.”

As per industry estimates, share of radio in total advertising, which currently stands at 5 per cent, is expected to increase to over 7 per cent post Phase III and over 9 per cent post Phase IV. The Indian FM radio industry was worth Rs 1,200-crore industry by 2010, currently seeing over 20 per cent growth. It is expected to see growth of nearly 30 per cent with Phase III.

Reliance Broadcast Network Ltd (RBNL) had earlier planned to invest around Rs 100-200 crore when the third phase of licensing for stations kicks off. Tarun Katial, CEO, RBNL, said, “With Phase III, the doors to this growth have now been opened and we’ll see an era of 30 per cent year-on-year growth for the radio industry. At RBNL, we will be looking at multiple frequencies, which will be a revenue multiplier without huge incremental capex/ opex. In addition to key urban centers and a network of C and D cities, the significant increase in radio inventory and the pricing power offered by multiple frequencies in cities will lead to content innovations and drive growth.”

He further said, “With expansion of FM radio to 294 cities, FM radio will now touch 90 per cent of the Indian population, making it truly a common man’s medium. FDI at 26 per cent is a welcome move, a consortium of investors or investor can largely look at a more active participation in the management of the company. There is merit however, for increasing the FDI limit further as presently operators are only allowed carriage of AIR news, hence not in pure play of news journalism/ broadcast. It is a good time for strategic investors to look at the industry. The industry is at an inflation point and the incentives offered in Phase III guidelines make it very attractive for investors to look at this sector, showing galloping growth in the next five years.”